SEC Charges Prager Metis $1.95 Million for Negligence in Audits of FTX

  • The U.S. Securities and Exchange Commission (SEC) recently settled charges of negligence and violations of auditor independence rules with Prager Metis CPAs LLC and its California affiliate, Prager Metis CPAs LLP.
  • This settlement involves $1.95 million in penalties and resolves two distinct actions concerning the audits of crypto exchange FTX.
  • Gurbir S. Grewal, the SEC’s Enforcement Director, highlighted significant oversights in the audits conducted by Prager Metis for FTX.

The SEC has reached a $1.95 million settlement with Prager Metis CPAs over negligence in auditing FTX, underscoring critical concerns over auditor independence in the crypto sector.

SEC Settlement Addresses Audit Negligence

The settlement, announced on Tuesday, reveals that Prager Metis CPAs failed to comply with Generally Accepted Auditing Standards (GAAS) in their audits of FTX between February 2021 and April 2022. The SEC criticized the firm for not conducting adequate risk assessments, particularly regarding FTX’s association with Alameda Research LLC, a hedge fund tied to FTX’s CEO.

Violations of Auditor Independence

Aside from audit negligence, Prager Metis was also found to have violated auditor independence regulations from December 2017 to October 2020. This breach was due to indemnification clauses included in over 200 audit engagements. The resolution includes combined civil penalties of $1 million and disgorgement with prejudgment interest of $205,000.

Implications for the Crypto Sector

The SEC’s actions against Prager Metis emphasize the importance of strict adherence to auditing standards and independence rules, especially in the rapidly evolving crypto industry. Such regulatory measures are vital for maintaining investor confidence and market integrity.

Broader Regulatory Context

This settlement underlines the SEC’s ongoing efforts to enforce compliance in the financial and crypto auditing sectors rigorously. Eric I. Bustillo, Director of the SEC’s Miami Regional Office, reiterated that auditor independence is essential for protecting investors and ensuring fair market practices.

Conclusion

The $1.95 million settlement with Prager Metis CPAs marks a decisive move by the SEC to uphold auditing integrity within the cryptocurrency space. By addressing both negligence and auditor independence violations, this action aims to reinforce the standards expected from auditors, fostering a more secure and transparent financial environment.

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Source: https://en.coinotag.com/sec-charges-prager-metis-1-95-million-for-negligence-in-audits-of-ftx/